Posted on 19 Jan 2022
Though this year's Chinese New Year holidays (January 31-February 6) won't officially begin for another two weeks, many electric-arc-furnace (EAF) producers have already halted production to avoid further margin losses, Mysteel Global has learned from market sources. And other mills say they are also planning to close, perhaps in the next few days.
"We switched off our EAF at the end of last week and we'll be off for the holiday break from next week," an official from a mid-sized EAF producer in East China's Jiangsu province said on Tuesday.
The firm has stopped its meltshop and rolling mills ten days earlier than it usually does for the New Year break, the official admitted, saying that "for now, we're unable to make profits, with scrap prices being so high for so long and the cost of logistics gaining." The scarcity of scrap supplies is causing the mini-mill additional headaches. "We plan to keep the office open for one more week to try to secure more scrap material, so that we can maintain normal production after the break," the mill official commented.
The situation was much the same with another small-sized EAF steelmaker based in South China's Guangdong province. "We will lose around Yuan 200/tonne ($31.5/t) if keep producing, and in any case, the recent increase in cases of the Omicron virus has also impacted our production. So we began halting production from yesterday," an official in this mill said Tuesday.
In fact, from Mysteel's latest survey on 40 independent EAF mills across China, 62.5% of these makers have already suspended operations, and another 20% responded that they intend to switch off their EAFs before January 20.
The suspension of the mini-mills' production saw the capacity utilization rate of 71 EAF steelmakers under Mysteel's tracking nationwide drop to an 11-month low of 36.69% as of January 13, down 7.78 percentage points on week.
As of January 17, Mysteel's steel scrap price index had actually increased by Yuan 167.7/t on month to Yuan 3,633.2/t on delivery, while China's national price of HRB400E 20mm dia rebar had decreased by Yuan 80/t on month to Yuan 4,783/t, both including the 13% VAT.
Consequently, the price spread between rebar and steel scrap had narrowed by Yuan 273.2/t on month to Yuan 1,161.2/t as of January 17, according to Mysteel's assessment.
Source:Mysteel Global
